Fraudster Escapes Deloitte’s Watch

Michelle Remo, “Big 4″ observer

June 09, 2011 /

Misericordia Health Center (MHC) in Manitoba, Canada has filed a lawsuit against accountants from Deloitte for failing to detect a fraud that caused sums to be funneled from the center’s coffers right under its nose.

The lawsuit filed by the hospital last week alleged that the financial fraud lasted for almost decade, having gone unscathed under the watch of Deloitte, which saw criticisms late last week amid the appointment of Steve Almond as its new chair.

Almond was the former auditor of the Royal Bank of Scotland which failed during the height of the global financial crisis.

The fraud was allegedly perpetrated by a longtime employee in the hospital who looted $1.5 million from automated teller machine (ATM) deposits between 2000 and 2010. The accused was arrested by police officers.

According to the suit, a former finance clerk understated the amount deposited Worker’s Compensation Board checks into the hospital ATM and pocketed the difference.

However, these allegations have not been proven in court. An outside firm is currently operating the ATM.
The suit added that it was the hospital staff that spotted the fraud instead of the auditors from Deloitte.

It said the accounting firm did not conform with the generally accepted accounting principles in preparing the financial statements.

The financial statements were said to be “materially misleading” with respect to the hospital’s financial position.

The suit said: “MHC says that D & T owed it a duty in contract and owed it a duty of care not to act negligently or make negligent misrepresentations to MHC and to ensure that cash and liquid assets as reported in the financial statements were not materially misstated.”